Mortgage applications rose last week in response to a drop in interest rates, though rates remain higher and mortgage applications lower than a year before.
- Mortgage applications were 2.2% higher this week than the week before following a decline in interest rates.
- Though not typically influenced by weekly changes, refinance applications also rose 2% last week—though still 86% lower than last year.
- Mortgage applications are still down 41% from last year as fewer potential home buyers are taking the plunge.
- With fewer buyers competing for homes, some buyers are able to negotiate more favorable prices, but buyers are still paying more for a home this year than last year.
Why it’s news
Mortgage rates may have seen a slight decrease, but they are still twice as high as at the beginning of the year. The average interest rate on a 30-year fixed-rate mortgage dropped to 6.67%—that’s down from 6.90% the week before.
Though the more favorable rates may be a welcome sign for buyers in a rush to buy a home, the rates are still high compared to previous years.
Mortgage rates this week haven’t moved at all and likely won’t due to the holiday.
The housing market is unlikely to make any major changes until early December when the Federal Reserve is expected to announce its next steps to handle the interest rates.
Backing up a bit
Home sales have been declining, but now it appears that investors are retreating even more than traditional buyers.
For the past nine months, home sales have declined due to high mortgage rates. Investors now appear to be bailing as well as investor purchases drop 30%.
Reports from real-estate firm Redfin found that investor purchases saw their largest drop since the Great Recession in 2008 and 2009. The drop in investor purchases is more significant than the drop in overall home purchases which fell 27%.
Investor buyers, usually part of a large fund, differ from traditional home buyers in that they are purchasing a home in order to later sell, develop, or rent it to make a profit.
Investors falling back may mean good news for homebuyers as they no longer need to compete with the cash-rich investors.